TEST OF INTER-TEMPORAL MODEL OF CURRENT ACCOUNT: EVIDENCE FROM THE CZECH REPUBLIC, HUNGARY, POLAND AND SLOVAKIA

• Authors: Vít Pošta
• Languages of publication: EN

Abstracts

EN

A current account may be viewed as an indicator of an imbalance between savings and investments in an economy. One of the key issues is the degree to which consumption is sensitive to actual temporary changes in current income. Modern inter-temporal approach builds on permanent income hypothesis, which concludes that the sensitivity of consumption (and savings) to temporary changes in income is low. The paper formulates a simple inter-temporal model of current account and employs the present value test of the model in the cases of the Czech Republic, Hungary, Poland and Slovakia. It further focuses on the role of habits in modelling current accounts. The results show that a simple inter-temporal model has some descriptive power, especially in the case of the Czech Republic, but overall it gives rather poor results. It is the assumption that the economy consists strictly of Ricardian agents that seems to be the main reason behind the empirical failure.

Keywords

EN

CURRENT ACCOUNT; INTER-TEMPORAL MODEL; INCOME HYPOTHESIS; PRESENT VALUE TEST; CZECH REPUBLIC; POLAND; HUNGARY; SLOVAKIA

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2013
• Volume: 61
• Issue: 9
• Pages: 897 – 917

Contributors

author

Vít Pošta

• Ekonomická universita v Praze, Správní fakulta, Nám. W. Churchilla 4, 130 67 Praha, Czech Republic